Oil rally continues, gold choppy

Fundamentals remain bullish for crude

Oil prices are trading back around their highest levels since late October after another surge on Tuesday. The rally continues as OPEC continues to miss output targets and Libya reportedly struggles to ramp up production again. There was some good news as Kazakhstan looks set to get back to pre-disruption levels in a couple of days.

But the fundamentals still look bullish for crude, with omicron seen being less of a drag on growth and demand than feared. Combine this with short supply and there may be some room to run in the rally as restrictions are removed. Of course, Covid brings unpredictability and zero-Covid policies of China and some others bring plenty of downside risk for prices.

Gold choppy after inflation data

Gold prices are quite choppy on Wednesday after making decent gains on Tuesday. The CPI data has weighed on the dollar, despite beating expectations, which has given gold a lift. It briefly went above yesterday’s highs before some profit-taking kicked in, with focus now back on the USD 1,833 resistance that’s proven so key in the past.

Powell’s testimony took some heat out of the move in yields yesterday which hit the dollar and boosted gold. It’s weathered the storm incredibly well in recent weeks as yields have surged and the dollar remained strong.

With markets potentially at peak Fed fear, at least for now, perhaps the bullish case for gold stems from yields not rising much further and expectations perhaps being slightly pared back. Because while the tightening environment shouldn’t be bullish for gold, it’s certainly doing it no harm at the moment. Which shouldn’t be ignored.

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